🌀🗞 The FLUX Review, Ep. 98
May 4th, 2023
Episode 98 — May 4th, 2023 — Available at read.fluxcollective.org/p/98
Contributors to this issue: Neel Mehta, Boris Smus, Ade Oshineye, Erika Rice Scherpelz, Dimitri Glazkov, Dart Lindsley
Additional insights from: Gordon Brander, Stefano Mazzocchi, Ben Mathes, Justin Quimby, Alex Komoroske, Robinson Eaton, Spencer Pitman, Julka Almquist, Scott Schaffter, a.r. Routh, Lisie Lillianfeld, Samuel Arbesman, Jon Lebensold
We’re a ragtag band of systems thinkers who have been dedicating our early mornings to finding new lenses to help you make sense of the complex world we live in. This newsletter is a collection of patterns we’ve noticed in recent weeks.
“They were in the wrong place at the wrong time. Naturally they became heroes.”
— Princess Leia Organa
📝 Editor’s note: This episode is a bit unusual, because instead of our typical article and lens combo, we’re running two back-to-back articles. We find it flows better this way!
📉🤑 ZIRP rules everything around me
What’s the impact of low interest rates on tech growth? It seems that the Zero Interest Rate Policies (ZIRPs) of the last 15 years led to what has been termed Zero Interest Rate Phenomena (also ZIRPs). Low interest rates made it easier to borrow money. They also drove massive influxes of money into the stock market and private investments, where investors hoped to earn outsized returns.
Though monetary policy is a complicated beast, the core mechanic of ZIRP is fairly simple. When interest rates are low, people seeking financial returns can’t just park their money in a bank account — they need to invest it in high-risk, high-reward ventures like tech stocks, startups, and (yes) cryptocurrencies.
One consequence of these factors is that there was a lot of investment in tech companies whose business models weren’t clearly grounded. Growth was valued over a path to profitability because the alternative, according to VCs like Bill Gurley, was getting “run over.” Advertising expenditures soared as a vast number of companies tried to acquire customers. The ground was so fertile that even bad seeds were able to grow. Companies spent money on perks for employees and great deals for customers (neither of which is uniquely a ZIRP, but both of which were beneficiaries of the low-rate environment).
With the recent increase of interest rates and the reduced availability of funding, a lot of that easily available money has dried up. As that happens, we are starting to discover what was a ZIRP and what was built on more grounded fundamentals. Unrealistically low prices, large customer bases with no viable revenue model, companies that are a bit too niche: all of these suffer in a world of higher interest rates.
So were the seeming benefits of ZIRPs bad? Would people have been better off if they hadn’t chased the hype? Not necessarily. Some players are benefiting from their stockpiled ZIRP gains: wealth, relationships, IP, and other assets that they built up in the good times. Such a hoard can tilt the playing field or provide a safety net, enabling these players to take bigger risks.
We can also apply this lens to ourselves. Are we, our teams, or our organizations beneficiaries of a ZIRP hoard? Have we come to depend on that hoard or the freedoms of the “roaring” ZIRP era? Have we been beneficiaries of a ZIRP tailwind that gave us and our strategies more success than we deserved? Are there formerly acceptable ways of failing that are no longer tenable strategies? If so, we need to adapt rather than continuing to play our greatest hits. We should consciously choose how we spend our personal or organizational ZIRP hoard.
ZIRP is a powerful lens for understanding who has been swimming naked and helps us be strategic about how to move forward. It provides an explanation for why some practices which seemed tenable for years are now failing. Just avoid using the ZIRP lens with cynicism. We don’t want to call everything that was associated with tech growth a ZIRP. To harness the power of this lens, we need to think about the underlying mechanisms. If we do that, then ZIRP can be a powerful lens for helping us to understand sustainable growth versus flash-in-the-pan growth.
📈😬 Rising interest rates, rising standards
Is psychological safety a ZIRP?
It depends on what we mean by “psychological safety.” Like many popular ideas, as psychological safety gained recognition, it was conflated with other terms, including comfort, well-being, being nice, or low standards. At times, psychological safety can be conflated with ruinous empathy, where, instead of giving useful negative feedback, we remain silent because it seems kinder (or just easier). These may be conflated with psychological safety, but they eventually diverge. Before we can understand why, we need to understand what psychological safety actually is.
Following Amy Edmondson’s The Fearless Organization:
Psychological safety describes a belief that neither the formal nor informal consequences of interpersonal risks, like asking for help or admitting a failure, will be punitive. In psychologically safe environments, people believe that if they make a mistake or ask for help, others will not react badly. Instead, candor is both allowed and expected. Psychological safety exists when people feel their workplace is an environment where they can speak up, offer ideas, and ask questions without fear of being punished or embarrassed.
In short, psychological safety is about ensuring that people feel able to take the risks that are frequently a necessary part of getting things done.
The Fearless Organization offers clarity on what is and is not psychological safety by separating safety and standards into two separate dimensions.
When psychological safety is high and standards are low, we are in the comfort zone. Although this quadrant can be sustainable in times of plenty, it can become unsustainable when the external environment changes. When faced with danger, it is easy to fall into one of two traps.
In the first trap, a team sees they are in danger but don’t feel like they can do anything about it. They fall into the apathy zone, where psychological safety drops and standards stay low. They choose self-protection over effort and don’t let themselves become invested in what they are doing.
The second trap is the anxiety zone. The organization suddenly shifts the standards into high gear, emphasizing the sense of danger. People here don’t necessarily care about doing the right thing. They want to be seen as doing the right thing. Most feel unable to share their vulnerability with others. Perfectionism runs amok. As a result, while the standards may increase, the individuals and the organization suffer: the individuals from the stress and the organization from the fixation on performative success rather than on learning.
Where we want to be is the upper right quadrant: the learning & high performance zone. When teams are here, they are able to experience the benefits of psychological safety. People feel able to take interpersonal risks and try new things. This helps the team by allowing its members to learn what is actually effective, especially in volatile, uncertain, complex, or ambiguous (VUCA) environments. They also feel motivated to take those risks because there is something real on the line. When a team is in the learning & high performance zone, then they can respond effectively to the changing environment around them.
So how do we move teams into this learning & high performance zone?
Whether a team’s psychological safety is initially high or low, suddenly changing the standards they are working under is a recipe for anxiety. Getting to the learning & high performance zone takes intentional guidance.
If psychological safety is low, the first thing to do is to work on improving it. This is a long process, deserving of its own article. It involves building candor and trust within the team and between the team and other stakeholders. If the external shift is hurried or urgent, teams may not have the time to make this transition.
Once a team has a foundation of psychological safety, a leader can help the team bridge the gap from illusion to reality. By helping the team to navigate the transition from a comfortable environment to a perhaps less comfortable (but more real) one, a leader can make it clear that the higher standards are not arbitrary and can engage the team in helping define and implement those new higher standards.
Getting to the learning & high performance quadrant is not easy, but this zone is the only one that’s sustainable in the long run.
🛣️🚩 Signposts
Clues that point to where our changing world might lead us.
🚏🎮 Ukrainian soldiers are using Steam Decks to control machine guns
One crowdfunding campaign has raised enough money to build remote-operated mounted machine guns that can be controlled with a Steam Deck, a portable gaming computer with joysticks and buttons on the sides (similar to the Nintendo Switch). They’ve given these guns to Ukrainian soldiers, who will be able to swivel the guns around and shoot while not being exposed to gunfire themselves.
🚏😈 Meta is warning about ChatGPT-related malware
Executives from Meta recently announced that bad actors were launching malware-filled ChatGPT clones, usually in the form of mobile apps or browser extensions. The company has found 1000 links that pointed to these malicious payloads; these represent about 10 distinct families of malware. Meta’s Chief Information Security Officer, commenting on the scamming potential of chatbot clones, quipped: “ChatGPT is the new crypto.”
🚏🚇 Germany is offering unlimited public transit for €49 a month
Building upon a popular pilot program from last year, the German government is letting people across the country buy an unlimited transit pass (which grants access to all local and regional trains, trams, and buses) for just 49 euros (about $54) a month; more than 3 million people have bought the pass so far. In addition to being cheap and convenient, this pass removes the headache of handling the many different, non-integrated payment systems used by various transportation companies across the country.
🚏📻 Ford is removing AM radios from new cars
Ford announced that it’ll stop putting AM radio in all new cars (both gas and electric) starting in 2024, citing falling usage of radio, though commercial vehicles (like trucks, vans, and semi-trucks) will keep the functionality. The removal of AM radio has been especially prevalent in electric cars; Volvo and most German carmakers have already dropped AM radio in their EVs. One analyst explained that electric motors “generate a lot of electromagnetic interference that affects the frequencies of AM radio and make it difficult to get a clear signal.”
🚏🇬🇧 61% of Brits want to rejoin the EU, according to a new poll
A new poll found that 61% of surveyed UK residents would vote to rejoin the European Union “if there were a referendum tomorrow”; this is a large shift from just two years ago, when the majority of surveyed Britons wanted to stay out of the EU. What’s more, 55% of respondents said they’d support having a new EU referendum in the next 5 years. (According to the poll, a growing percent of Brits believe that the UK will apply to rejoin the union, and a plurality believe that the EU will let them back in.)
📖⏳ Worth your time
Some especially insightful pieces we’ve read, watched, and listened to recently.
AI Isn’t the App, It’s the UI (Stack Overflow Blog) — A refreshing new take on the strengths and weaknesses of generative AI. AI is too unpredictable, stochastic, and “unconstrainable” to work well in situations where you need deterministic behavior and guarantees of correctness. Instead, AI works best as a conversational translation layer between messy human desires and deterministic conventional software.
Scintillation Points (Venkatesh Rao) — Rao suggests that sceniuses (scenii?) form around preferred topics that he calls “scintillation points” (after “Schelling points”). These not only serve as nebulous attractors for the group to make steady progress toward, but also provide social validation for each individual that their exploration is worthwhile.
Features English is Missing — But Most Other Languages Have (NativLang) — Details several common language features that aren’t present in English, including clusivity (having different forms for inclusive vs. exclusive “we”), question particles, and evidentials (markers for how you know something). Then speculates how English could theoretically add such features.
Why Freight Rail Blocks Crossings in Houston (Christof Spieler) — A systemic look at how geography and infrastructure have caused massive backlogs of freight trains heading to rail yards near Houston. A combination of congestion, at-grade junctions, and road crossings has resulted in many trains blocking streets as they wait for their turn; the impacts disproportionately affect low-income and minority communities, to boot.
Apple iPhone Debut to Flop, Product to Crash in Flames (2007) (Suckbusters) — A failed but instructive prediction from 2007. When we read it with a historian’s eye, we can see that the author underestimated how intuitive touch screens might become; failed to account for Moore's law; and over-indexed on minor pain points (e.g. media controls) that can be solved with minor tweaks (in the media example, with buttons on headphones).
© 2023 The FLUX Collective. All rights reserved. Questions? Contact flux-collective@googlegroups.com.